(Adds comments from USDA, Tyson Foods)
By Tom Polansek
CHICAGO, Sept 29 The U.S. Department of
Agriculture said Thursday it will require meat packers to report
cattle purchases they make through online auctions to the agency
starting next week, a move that stoked traders' hopes for more
The USDA will begin including transactions from auctions on
the Fed Cattle Exchange in pricing reports that top packers,
including Cargill and Tyson Foods, use to
determine how much they should pay farmers for an increasing
percentage of animals sold.
That means the exchange, which has held eight auctions since
launching in May, will begin impacting prices that packers pay
in the broader market.
The decision is the latest effort by government and industry
officials aimed at improving transparency in cattle markets,
which have come under heightened scrutiny following a sharp
setback in prices in the second half of last year.
The exchange had asked the USDA to include its auction
results in the pricing report.
Cargill and Tyson said they were glad the agency agreed.
"Price discovery is important to both the packing and
feeding sectors, and we believe this move will improve it,"
Tyson spokeswoman Caroline Ahn said.
By requiring packers to report transactions, the USDA
intends to provide transparency to markets that few people see,
such as deals farmers negotiate privately with packers. Cattle
auctions are not normally included because anyone can attend
The exchange is different from other auctions, though, said
Michael Lynch, director of the USDA division that compiles the
pricing report. It provides an eBay-like platform for producers
to sell their cattle to packers, instead of selling animals on
behalf of producers, he said.
Declining transparency around cattle pricing has concerned
producers and traders for years.
Farmers in the cash market have increasingly signed deals
months in advance to sell cattle to packers, rather than
negotiating prices shortly before sending animals to slaughter.
Some farmers and traders have said that shift has created a
questionable pricing system. Packers often base prices for
longer-term contracts partly on what the USDA reports was the
average price paid in dwindling near-term negotiated deals.
Danny Jones, president of exchange owner Superior Livestock
Auction, said the auction results could help the USDA
"legitimize" its reports by increasing the number of deals on
which it bases average negotiated prices.
Advance sales, known as formula contracts, accounted for
about 57 percent of cattle sales last year, up from 33 percent a
decade earlier, according to USDA data.
Cash sales negotiated closer to slaughter accounted for
about 21 percent in 2015, down from 52 percent in 2005.
(Additional reporting by Theopolis Waters; Editing by Bill
Trott and Grant McCool)